India's Maruti Sukuzi to seek minority shareholder nod for plant

Sat Mar 15, 2014 7:57am EDT
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By Himank Sharma and Subhadip Sircar

MUMBAI (Reuters) - Maruti Suzuki India (MRTI.NS: Quote) said on Saturday it will seek minority shareholder approval for a plan to outsource production at a new factory to its largest shareholder, Suzuki Motor (7269.T: Quote), after its leading investors opposed the move.

Suzuki Motor Corp, which owns 56 percent of Maruti, in January had announced plans to invest $488 million in a new plant in Gujarat state in northern India and then sell cars produced at the plant to Maruti, shelving an earlier plan that would have seen Maruti set up the factory itself.

But the move has been strongly opposed by leading institutional investors, in a rare case of shareholder activism in India. They have argued the transfer of manufacturing to Suzuki would mean the Japanese carmaker, rather than Maruti, would reap the benefits of rising domestic sales.

Maruti Suzuki, which accounts for almost 1 out of every 2 cars sold in India, also announced key changes regarding how the production plant would be funded and valued in case the deal is terminated, in a bid to further assuage shareholder concerns.

"There was a misunderstanding amongst investors and a lot of skepticism about what we were doing, so we have removed the major issues that were bothering investors," Maruti Chairman R.C. Bhargava told Reuters.

"We are now confident we will get minority shareholder approval."

Maruti Suzuki did not announce a timeframe for minority shareholder approval in a statement issued after a board meeting on Saturday.

Seeking shareholder approval will give institutional investors opposed to the plan more time to gather support.   Continued...

Traffic moves along a busy road in front of the Maruti Suzuki corporate office building in New Delhi July 24, 2013. REUTERS/Anindito Mukherjee